Another pro-green, pro-free trade, anti-Rudd and -Obama rant (ps: I don't like Nathan Rees, either)

Al Gore's plan to start solving the world's climate problems while simulataneously dealing with the economic crisis is definitely worth reading. He makes the point that if you're going to be stimulating the economy through infrastructure spending anyway, you should take the opportunity to build the smart grid.

I've been reading about the smart grid recently in the book I mentioned in an earlier post: Thomas Friedman's Hot, Flat and Crowded. When Friedman writes about the smart grid, it's incredibly exciting; the Wikipedia entry I linked to is pretty dull by comparison, but sorry, I'm just not in a mood to explain in detail why it's such a great idea. If you're interested in such things, the Friedman book is fantastic, by the way. (Really quick explanation - a two way grid, so you can sell electricity into the grid as well as taking from it; spot prices for electricity, rather than an average price, so that at times of peak demand correspondingly "smart appliances" can either shut down, or alternatively return energy to the grid at a profit to the consumer. Thus eliminating the stupid system whereby electricity companies build power stations to handle the demand on the couple of hottest days of the year. There are other benefits as well.)

In contrast, Obama's first priority seems to be stimulating the economy by protecting the US car industry. So much for those who said he was just saying protectionist things to get elected. Kevin Rudd - it almost goes without saying, doesn't it? - is going to do the same thing.

Anyway, thinking about Al Gore made me remember the 2000 election. I'm not sure I followed it that closely at the time - what I seem to remember is that both Gore and Bush were seen as bland centerists (woah!), Bush ran as the compassionate conservative (double woah!), Al Gore ran from Bill Clinton, and Bush "won" mostly because people thought he would represent a return to morality (as many woahs as you want). Remembering this leads me to conclude that a US presidential campaign is a pretty useless way of judging what sort of president a candidate will be. So I'm going to lay off Obama, at least until he takes office. I don't hate him, he's a smart guy of decent sentiment and mostly reasonable positions, and I hope he'll be the president we all want. Still, I wish Al Gore had put his hand up. How lucky the US is to have such a passionate voice arguing for sensible and achievable solutions to global warming! The Australian Greens are so retarded. I mean, I vote for them, but boy are they dumb. Sixties hippies. I'm yet to hear the words "smart grid" even mentioned in Australia.

Back to the car industry - I just don't understand this continual propping up of the auto industry, both here and in the US. For as long as I can remember, in both places, car manufacturing has been a struggling industry. It's not hard to work out why - this sort of heavy manufacturing can be done so much more cheaply in developing countries than in first world countries like Australia and the US. Is this going to change sometime soon? This isn't a bad thing. Moving such industries to developing countries means jobs for really poor people who don't have the luxury of a welfare safety net, and cheaper cars for people in developed countries. In really brief form, that's why free trade is a good thing.

There's a bit of greenwashing - supporting hybrid cars - in both plans, but greenwashing is all it is. If you really want to support the development of hybrids, there are better ways. Increase petrol taxes (yeah, right), or alternatively give a tax credit or rebate to people who purchase hybrids.

But while I disagree with combating the economic crisis by giving money to car companies, it is still conventional Keynesian economics. As long as you stimulate, it doesn't mattter a huge amount what you do with the money. I wish governments would put it to something useful instead of just protecting their voter base, but what can you do?

I mentioned a while back how economists, when you hear them asked about the possibility of another great depression, tend to laugh and say "No way. We know so much more now." What they'd say we know is that in downturns, governments should increase spending. The thing you definitely don't do - the classic mistake of the Depression - is increase taxes and cut government spending. Despite my criticisms, both Rudd and Obama know this.

To what dark corner of the world would one have to go to find a government so stupid, so incompetent, as to not understand this? Where could one find a government that would actually increase taxes and cut spending while heading into a massive financial crisis?

Ladies and gentlemen: Nathan Rees.

posted by Nicholas @ 7:17 PM